Determinants of Banking System Fragility: A Regional Perspective

European Banking Center Discussion Paper No. 2012-009

CentER Discussion Paper Series No. 2012-015

50 Pages Posted: 16 Feb 2012

See all articles by M.A. Elahi

M.A. Elahi

CentER, European Banking Center (EBC), Tilburg University

María Fabiana Penas

Universidad Torcuato Di Tella

Hans Degryse

KU Leuven, Department Accounting, Finance and Insurance; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 4 versions of this paper

Date Written: February 14, 2012

Abstract

Banking systems are fragile not only within one country but also within and across regions. We study the role of regional banking system characteristics for regional banking system fragility. We find that regional banking system fragility reduces when banks in the region jointly hold more liquid assets, are better capitalized, and when regional banking systems are more competitive. For Asia and Latin-America, a greater presence of foreign banks also reduces regional banking fragility. We further investigate the possibility of contagion within and across regions. Within region banking contagion is important in all regions but it is substantially lower in the developed regions compared to emerging market regions. For cross-regional contagion, we find that the contagion effects of Europe and the US on Asia and Latin America are significantly higher compared to the effect of Asia and Latin America among themselves. Finally, the impact of cross-regional contagion is attenuated when the host region has a more liquid and more capitalized banking sector.

Keywords: banking system stability, cross-regional contagion, financial integration

JEL Classification: G15, G20, G29

Suggested Citation

Ather Elahi, Muhammad and Penas, María Fabiana and Degryse, Hans, Determinants of Banking System Fragility: A Regional Perspective (February 14, 2012). CentER Discussion Paper Series No. 2012-015. Available at SSRN: https://ssrn.com/abstract=2005034 or http://dx.doi.org/10.2139/ssrn.2005034

Muhammad Ather Elahi

CentER, European Banking Center (EBC), Tilburg University ( email )

P.O. Box 90153
Tilburg, DC Noord-Brabant 5000 LE
Netherlands

María Fabiana Penas

Universidad Torcuato Di Tella ( email )

Saenz Valiente 1010
C1428BIJ Buenos Aires
Argentina

Hans Degryse (Contact Author)

KU Leuven, Department Accounting, Finance and Insurance ( email )

Naamsestraat 69
Leuven, B-3000
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
184
Abstract Views
1,228
rank
102,130
PlumX Metrics